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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla. Opening bell market action. New.

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03:00:00

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San Francisco, CA, USA

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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480

TOPIC FREQUENCY

Us 24, China 21, London 17, Carl 12, New York 12, Europe 12, Pfizer 11, California 11, U.s. 10, Google 9, S&p 9, Mcclendon 7, Zynga 7, Boston 6, Hp 6, Steve 6, Apple 6, Sirius 6, Morgan Stanley 6, Samsung 5,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl  
   Quintanilla. Opening bell market action. New.  

    August 7, 2012
    9:00 - 11:59am EDT  

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>> very strong and the second half should be strong, too. we're looking forward to a good second half. >> right. thanks for being with us today and bringing as you do. >> thank you very much for having me. always fun being here. >> it was a party. >> make sure you join us tomorrow. "squawk on the street" begins right now. good tuesday morning. welcome to "squawk on the street." with melissa lee, david faber at the nyse. stocks at some three-month highs this morning and whos for more fed action possibly feeding that today. seven points to the upside. as for europe, they're up for three straight days despite less than stellar data. >> so, our road back this morning begins in boston where
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eric rosenberg is calling for open ended easing. >> standard charter stock down 20% after new york state accuses it of illegally doing business with iran. >> amazon declares war on zynga, but is the retailer spreading itself too thin? >> and youtube will no longer come standard on your iphone. what's the the trade now from apple as it flirts once again with some all time high sns. >> let's get to eric and the the federal reserve of boston saying the fed needs to take action to ignite economic growth. let's bring in cnbc's senior correspondent, steve liesman with more coming off of an interview with eric. >> i think there's three things eric has decided. first is that as you said, the
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second half of the year, this is not going to have an economic turn around. it's going to be at best, the growth we had. we predict eed the unemployment woulz rise. the other two essential parts of his forecast is that congress does not think and you can't count on the european central bank for any substantial action. given those three realities, he is saying the federal reserve should do an open ended quantitative easing program. for example, say it's allotted for six months and it would continue if certain targets were hit. he said he likes a 4.5% nominal gdp target and some of the targets by charlie evans, the chicago fed president, an unemployment rate of around 7%. he says we cannot afford to lose any more time in this economy.
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he's not willing to risk another two quarter of sub par growth especially on the labor market and he said he is not concerned about the politics. he said the federal reserve needs to get the politics right. needs to get the economics right and the politics will take care of itself, guys. >> steve, this would imply that the fed has the tools such as the focus mbs buying the tools to move these needles. the the is that the general consensus and move the needle on gdp or other measures of growth? >> well, eric rosengran has the consensus of feels as if the federal reserve can move those deals. he feels if the fed goads in and buys mortgage-backed securities, it would reduce mortgage rates, help housing and have an effect on the stock market and other parts of the economy. so, he believes that. more broadly, you're right.
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the concept of how much good additional quantitative easing would do and whether or not the cost would outweigh the benefits, there is not a consensus among economists. he feels like this is the point in time where a forecast that's not going to improve, this is the time to pull the trigger on additional quantitative easing. >> he's a nonvoting member, but to what degree is his argument absorbed by the chairman, head of jackson hole, going to make a difference or not? >> i think it does. i think eric rosengran and the chairman are close. i think they talk a lot. what eric rosengran matters to the chairman. i think the chairman needs to be convinced that what eric rosengran is saying the correct. that additional purchases by the fed will have an important and meaningful impact on the economy. i have to tell you, i haven't heard that yet from the chairman. i think he's spoken about the
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fed can take action. that action the fed would take would be meaningful, but i haven't heard him put together the two ideas and i think that's what jackson hole is going to be about. if the fed is on the verge of a new program, i think the chairman could be expected to signal that at the end of august and we'll have to be watching closely what he says. by the way, there is opposition. richard fisher said it's a treacherous time for the federal reserve to act because of the misperception it's being political. there is an idea out there that by the federal reserve acting, it would in fact let congress off the hook. that's an important wing of thought in the federal reserve right now as well. >> the frustration of those who don't agree with qe, who disagree with tripling down, their frustration is palpable today after what he told the journal and told you this morning. >> riots in the street. the anti qe protesters will be
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out there. i don't know, carl. i think that's right. i think there are people who have a lot of concerns about the fed. there was a whole other school of thought which says what the fed has done has been detrimental to the economy and has hurt the economy in many ways. that is not rosengran's thinking and not one shared by i don't think many members of the board itself or the fomc think it has been detrimental. >> all right. >> good stuff, steve. thank you so much. nice job there in boston as well. steve liesman joining us with eric rosengran. meantime, the slide continues. company losing around $12.5 billion after the new york state regulator accused the bank of laundering money for remark. just a string of continue vrovc. the bank continues to insist
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that the dollar amount not in the billions and not 60,000 transactions. >> we have yet to see what evidence they'll have. the losses, top bank regulator in the state of new york bringing these charges, if you will. based again on e-mail traffic and the thing that is we see so often. standard charter is a large back. $640 billion in assets. 1,700 branches. does a lot of business in asia and the middle east. clear a lot through new york as you also might anticipate given the size of the bank itself, so we'll see. but you're right. adding it on to the hsbc. they were just losses. nobody broke the law per se, at least we don't think so, of course jpmorgan put that out there a little bit. the libor, let's not forget that. it's just building a case of a lack of confidence. >> the decline of charter in london trade. the biggest decline in almost
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four years and now, the concern is will there be fines for standard charter. will top managers start quitting? those are all big questions for investors in a stock seeing a 20% decline this morning. so those are going to be key. >> and people come back to the big banks again. for good reason. not just because of these kinds of issues that seem to hover over so many of them, but also because the the return on equity is really terrible. perhaps they deserve to be trading at those significant discounts for book value unlike many of the regionals. i'm channelling cramer here. we know where he'd go with this in terms of at least kind of thoughts about the money being served in those banks than in the big ones. >> and then the color on some of those e-mails. sort of brings into sharp relief the differences various countries have with regulators in other countries. that's why it's hard to get some
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of these things coordinated on a global basis. you know what i'm saying? >> let's move on to amazon. amazon is launching its own game studio along with a social game for facebook called living classics. amazon is not giving out much information, but it says it is hiring, so putting some money where its mouth is. amazon shares just higher by a buck or so, but of course, the question is, is everybody getting into all of these lines of business. what works at this point and what will make money. facebook with games, zynga with games. >> amazon seems to be okay with not making money. a number of businesses. >> they're willing to invest. they've been very successful in branching out. mid to late '90s, now, they sell
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virtually everything. they moved into being a cloud company and are one of the leaders in terms of the cloud. amazon has successfully moved into. what i wonder is mobile and gaming and the questions they are to the larger questions of how you're going to move wray way from the desktop to the mobile platform and succeed still in making money. >> to weigh in on amazon, zynga and facebook as well, which is getting into some gambling. joining us this morning, the principle of hudson square research. >> morning. thanks for having me. >> straws here or not? >> i think it's a bad idea. i don't really understand it. first of all, the wait to the party, social gaming was a craze for all about two years, maybe a year and a half. and it's under pressure. zynga reported that facebook
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gamers for them fell 16%. fell 10% year or year. they're not making a had the of money on it. the big problem for social gaming, i think this will also apply to mobile gaming. at the end of the day, you're selling games to people who are nongamers. that are casual gamers. they don't have a big part of their budget dedicated towards gaming. they do it as a time killer. they don't spend a lot of money on it. second of all, seems off strategy for amazon. amazon is a seller of content and products. they make a couple of products in the fire. but really, that's just a vehicle to be able to continue to sell content. they don't make content.
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>> but daniel, how bad of an idea is it in that. does this change your view of amazon or your rating or price target of anything? >> do you expect to hear from amazon how much they spent on social gaming and how much they've made if anything? >> i think you could fit the development cost of this, you know, inside a thumbnail at amazon. i don't think it will show up, it's far too small. my guess is from a financial standpoint, if this is wildly successful, it will be a nonimpact. as carl points out, they're kind of used to not making a whole lot of money, so the margins on social games are thin. so that part is consistent with amazon. the other issue is they're trying to make the kindle and maybe phones and amazon
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platform. it's very difficult when the platform starts competing with other content for buyers who want to be on that platform. i think that's also a bad idea. >> yeah, this first morning, the the first party provider content to the kindle is raising interesting conflicts. what about zynga? does it add to the sentiment on a name that's already had trouble in terms of growth and profitability? >> maybe at the margin. you know, i think in all these guys are chasing after a very narrow population. less than 2%. of the people who play zynga games and we think that applies to the entire social gaming ecosystem, less than 2% of the gamers actually spend money and the vast majority spend the money with zynga. for whatever people criticize zynga for, their games also shoot up to the top three or five. what ea, they're not even in the top ten. so when they launch a game.
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maybe for once, they are with the same specific franchise, but they haven't made any money on it. >> interesting story. daniel, thanks so much for your time. we'll watch both stocks today. when we come back, the maker of luxury luggage reporting results for its second quarter. stocks soaring. the ceo will join us at 10:30 eastern time. his first since the company went public back in april. looking for some modest upside after a couple of good days. down 21 yesterday. we were up 91. "squawk on the street" back in a minute.
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we are looking to add on to yesterday's gains. can the s&p cross 1400 and close above 14? we sort of bumped up against that yesterday and fell behind. so today, looks like we could. >> lot of discussion about whether this rally has been a little suspect. a lot of the sectors have been
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outperforming. russells had a good run. it's not the classic comeback you'd want so see even as you're marching back to these may highs. >> the nasdaq, now up almost 15% year to date and today, goldman sachs, the reason it's reading on the semiconductor to an attractive, they're saying unit shipments have been between 10 and 20% below normalized demand so they are saying these leaner supply levels will help with the lower near term demand we're seeing from semis, so they are positive on a couple of names. altera and xp, see if they get some positive action, but overall, attractive on semis. >> ubs initiating hewlett-packard with a sell. saying the turn around's going to take years. meg's doing what she can, but you have neither the purity of ibm or the tablet strength of an
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apple or samsung. there are any number of questions about hp, what the strategy is going to be to even know how it's working and better to stay away, i guess. we'll see. that stock has been trading near the lows for some time now. making new lows, i should say. haven't seen it today. >> it does look like it's going to be open off maybe 15 cents lower. let's get to our question. are presidential candidates just like us? take a look at this photo of mitt romney. this was taken in wolfeboro, new hampshire. we asked him caption this image. let us know. we've got your responses throughout the morning. coming up next, we get the word from the floor. see how you should be applying this market. let's take a look once more at
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solutionism. the new optimism.™ ♪ this dream about eight minutes before the bell. let's bring in art cashen. good morning to you. i want to start off with eric's comments about significant qe that we focus on mortgage-backed securities that would be open ended until certain targets are met. what would the market reaction
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be? you would think it would be positive. at the same time, that would imply that the fed actually does have power to move the needle on some of these targets with what they can do. >> yeah, they've had some great difficulty moving the needle. i think most traders will see this as the first warning flag put up. you know, bernanke and his fed have tried for transparency despite frustrating kevin ferry and i think what they want to do is begin the discussion. you know, rosengren to some degree is the nonvoting stalking horse of the discussion. let's see what the reaction is and see where that goes. open ended was the thing that caught everybody's attention. >> you mean more aggressive than even you would ask for? >> almost like keep doing it until we see the needle move, which can be very frustrating.
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yesterday's senior loan officers report was interesting because on the top level, it looked like lending was just beginning, but it was only the top customers down at the bottom. small businesses that needed it. you weren't seeing that. so the question is, liquidity. can they get the liquid to the people who need it? >> his point is that the areas where you would expect easing to help housing are actually paying off to some degree. is that what's happening with you? >> it's paying off in the triple. i think the housing market is a little bit deceptive. i think diana and some of the people on your team have done a great job pointing out there are i don't want to use speculators, people don't like that, but people are buying houses to rent them, not own them. and that's distort iing the the inventory and simply to some degree, so again, unless you can get not only the money down where it can be borrowed, but to get the people's rating high
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enough, that's where the blockage is right now. >> 1400. that's been a tough level to crack so far. we've been bouncing around it. if we break it and hold, is that a good sign r for the markets or not necessarily? >> it would be great psychologically. yesterday looked like a titanic struggle at 1400. no sense of drama down here. i think if they get above say 1406, you might inspire some short chair nervous already. >> but it's no august on a light data week. everybody's on vacation. does it count? does all this count? >> here we are. if the tree falls in the forest and no one's around to hear it. >> we're here. >> see, you haven't paid attention back at philosophy school. >> good to see you. >> meantime, opening bell about four and a half minutes away. another big day of trading and a lot more "squawk on the street." [ male announcer ] if you believe the mayan calendar,
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front not too long from now. you're watching "squawk on the street" live from the financial capital of the world. the opening bell set to ring in little more than a minute's time. we haven't talked much about n manchester united. road shows making its way through new york and some of u.k. >> we've got a rebust calendar that you might anticipate. for august, we saw little activity in june after the big ipo of facebook in may. >> rich peterson just sent this to me, that information technology is the second best technology sector and the s&p with a 16% gain. telecom is the top performing sector with a 19% gain. not surprising given the performances we've seen in the dividend wielding stocks in this era of sort of defensive investing. >> percentage gain after its earnings most recently and a
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very strong quarter. >> the price on the iphone 4s. >> 150 bucks. >> 149 i think. >> opening bell and a look at the s&p 500 at the top of your screen. the big board, taro pharmaceuticals celebrating its recent listing. manufacturer of residential and commercial building products. one thing we have not talked about though, j&j and pfizer, once again, some disappointing results. this case, a drug that people had a lot of hope for. >> last month, they announced that their partner pfizer and elan, that the drug failed to work in patients with a genetic mutation. yesterday, they announced it also didn't work in patients without the genetic mutation, so in either of the groups, it
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failed to meet critical end points. this is late stage testing and now, they are abandoning it. take a look at e man shares. this could mean a question of what next. because this is a big part of their pipeline, so a lot of analysts are wondering what strategic direction elan will take. >> this has been a long time and coming. there was a time when elan had yet to license fully this drug and there was a great deal of hope built into its stock price that this would be a success, one of perhaps the first successful treatments. the drug companies will continue to focus on this, given the preponderance of people who have the disdiz and unfortunately are going to get the disease as the u.s. ageing population continues. >> the chevron that we talked about last night is out, but obviously some concerns about this refinery enrichment near
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the san francisco bay area. 240,000 barrels a day gets process and some of the pictures from yesterday were very dramatic. it's a good thing it's out. >> it is. this morning, tutor pickering saying this, nobody really knows what the impact really is on prices at this point, but that tsoro could benefit. up 5%. most of tsoro's assets are on the west coast, so if there is a disruption on the west coast, they stand to benefit from that increased flow there. you see the gains in shares. >> we should mention shares of chesapeake are up nicely. it's conference call is continuing. they've talked about their 2013 capital spending falling by as much $6 billion.
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of course, a key there and the natural gas production, up 7%. a key there is also asset sales. they continue to focus on those, follow the process of trying to sell a number of significant assets to the company and they, they say that that will continue as well as their net rises. again, the stock up. >> 1400. >> see if you can get it to '06. let's get over to bob pisani. actually, breaking news. kate? >> a little more detail on the chesapeake earnings call. i listened to companies from the ceo and of course, people are expecting to see more commentary on the corporate board shake up or the misstatus in some of the regulatory investigations, however, he made news by talking
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about the natural gas market. if we listen to what he says, he thinks we could be poised for a major upcycle. >> the u.s. is likely in the very early stages of a multiyear upcycle in gas market fundamentals. and clear evidence is readily apparent. gas prices have bounced strongly upwards from the 1.84 level set on april 19th, which we believe marks the low. >> interesting commentary coming from the nation's second largest gas producer after exxon. this morning, i checked just now, natural gas was nosing toward $3 for british thermal units and he thinks it could go further because he thinks we're likely to go from a glut in natural gas storage to possibly a deficit, so back to you guys. >> this is the first time that aubrie mcclendon has spoken
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since he stepped down? >> i believe that's right. at his annual meeting, they were still looking. since then, they've named archie dunnam to take that place and he did sort of thank the current new board, which has a lot of new faces on it, as well as arch archie dunham. there was a bit of a nod to everything that's been going on, but really the focus is very much on asset sales. also, the shift from natural gas production to liquids, which seems to be going faster than expected and just kind of on the outlook. >> thanks so much. let's check in with bob pisani with more on what's moving this morning. >> we're almost in 1402 on the s&p. not just three-month highs. we are less than 2% from four-year highs in the s&p 500 and we're only what, 100 points
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from similar numbers in the dow jones industrial average. volume has been light. but we are inching up slowly but surely. as we've noted many times, this year, the dividend payers, telecom stocks have been leading the market, but in the last week or so, there's been some rotation out of that. they have been market laggards. we've been seeing technology, materials, financials lead the mark. it's a little early to say that the dividend paying rally is over at this point, but certainly, defensive names are being sold and more shall we say global growth names are being bought. that's a very good sign and part of this is do to the draaccess europe. germany is at a four-month high. the euro has been up so far this month here. there's a lot of talk that mr.
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dragy is going to lay out a further path. that's going to be september 6th, as i recall. so there's a lot more feeling that the ecb is working more closely with a bailout funds, the esf. both the ecb and the bailout founds would engage together or separately. so that's important. the other thing that's very important this morning is the australian central bank left interest rates unchanged. that's not that surprising. they made a statement saying china's growth was quote not slowing further. that is an extremely important factor. they're the number one business dealer with china. it's the biggest trading partner. they sell huge amounts of iron ore to them. the australian dollar is near a five-month high. this might mark the bottom for concerns about china's growth
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going below 8%. >> want to shift to bonds and the dollar. rick santelliy at the cme group in chicago. i noticed the ten-year back above that moving average. first time in a few months. >> this is just such an interesting case study in how flight to safety and safe harbors may unravel and this is especially important you know with the fed owning so many securities and the fact that we had a fed official today who just wants to have open ended take congress off the hook forever. look at a 24-hour chart of our rates. 161, basically, the highest level in a month. around the 4th of july. now, this is fascinating. see and this is what i was talking about. a case study in the u.s., when data gets weak and you talk about quantitative easing, things happen, but in europe
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where the desperation looms large, factory orders in germany were down. fourth quarter down for italy. those conversations just like here, really are never the main conversation. the main conversation is how we're going to manipulate rates to look like the scenario that can lead to real growth. to see these rates start expanding out is something to pay attention to. the fact that somewhat moving higher in price together, boy, that could be a game changer to pay attention to. back to you. >> thank you. now let's go to sharon epperson at the nymex. we were just talk iing about -- what is the impact on prices so far. >> we're looking now at the fire finally being out, but this is one of the largest refineries in the nation. a good bit of consumers get
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their gasoline from this particular refinery, so it's having an impact on california's gasoline prices. we are seeing not a huge impact on futures market in new york, but in california on the car market, we're seeing a 15 to 20% spike, about 6% gain since yesterday already at the start of trading there in that spot market. so it could have a significant impact on gasoline prices in the state of colorado where they're already among the highest in the nation at 3.86 a gallon. more than 20 cents above the national average and already higher than where prices were for california residents a year ago, so this is likely going to have a huge impact in california. it may have some impact on the national average as well, but it's california residents that are going to feel it. back to you. >> all right. thank you very much, sharon epperson. coming up next, shares of sirius
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sirius xm posting second quarter earnings in line. the director and senior media and entertainment analyst and -- joining us both now. let' me start with you, matt. you know, looks like a pretty good quarter. give me your take on it overall. i know subscriber editions, hit some nice numbers there. >> actually, the numbers are pretty much in line with what we're hearing after the preannouncement. we do like the name, but prefer -- 50% and honestly, at this level, we're concerned about the change situation on
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the royalty side as well. so i think it's a great operating story, but the stock is -- >> explain a little bit to me and my viewer in particular why you're concerned about why the valuation in your opinion is a bit high. >> well, i think you have to go out a couple of years before you get to double digit cash flow yield yield and there is a significant risk in our view, up considerably the next year. as a result of what's happening, judge tribunal later this year. >> hanging all over sirius of course is what liberty will or will not do in the probably not too distant future. whether it's a trust or some other transaction of some type. what are you expectations? how does that color your approach to the stock? >> i respect matthew's opinions on this, but i think a better
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way to play sirius today is through sirius. liberty owns close to half. i think sometime over the next six months or so, i would expect them to try and exit their sirius day without paying taxes. i think the value is close to fully reflected in liberty media, so the only real kind of upside in media is stock and you get 100% of that back. you get only half that at liberty. i think lib erty's had a great run. one of investments of the downturn in 2009, you know, i think they're near ringing the cash register on that tax free. >> is there any question whether he will continue on as ceo? he had made comments on whether he and the board would review contracts for the next earnings. >> i think mel's been a great ceo. i think he said he will start
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those discussions in the third quarter. we'll see where they wind up. i think the board's happy with his performance. i think he distances himself from the idea his return is predicated on what happens with liberty on the call. do they want him to return? he's done a good job. i think the odds lean towards him returning, but we'll see how it plays out. >> remember back in may -- said to shareholders he didn't want to work for a controlling shareholder even if it were warren buffett. >> i think mel's done a great job and liberty guys respect him. but i think the business is on a real nice course and he would be replaceable under certain circumstances although a lot of people would love to see him stay. i also think of the reverse trust, i wouldn't see that as a catalyst if it pops the stock up. i think there were some people
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who were not able to expect the premium after having made that investment a few years ago. they just need a couple percent more so they can do things on a tax advantage basis. >> to me, on this show, actually, there's no way they're going to go up. last word to you, barton. in terms of the future with the company, in terms of its current growth path, are you positive on what you see? >> sirius is a great company. they're going to be doubling ebita over the next few years. i don't think the idea's reflected. i think after you adjust, it's trading at 11 times. it should be trading well north of that. we've got a 2.70 price target. i think it's one of the few stories where you have a lot of
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comfort on whether the growth will play out. very good business today. >> all right. we'll leave it there. thanks to you both. >> don't forget to keep sending your tweets. are presidential candidates just like the rest of us? this photo of mitt romney taken monday at hunter shop and save supermarket in wolfeboro, new hampshire. what's going on here? give us your caption. can you see what's in the cart? i can't exactly make it out? >> a case of water. >> water. >> does a lot of talking. got to stay hydrated. we'll get some of your answers after the break. k. the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world.
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"squawk on the street" on the tuesday morning. are presidential candidates just like the rest of us? this photo of mitt romney was taken monday at hunter shop and save in wolfeboro, new hampshire. what's going on? caption this image. one tweets the butler's day off. just terrible. chad writes the obama economy is
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so bad that mitt has to do his own shopping. ralph writes, i hate shopping with the van when the helicop r helicopter's in the garage. and now you know why i don't have time to release my tax returns. somebody's got to make the household run, right? sort of says something about how candidates get defined in the early going. >> i do wonder, we think he's been doing that run for years and years, maybe. i don't know. >> when we come back, best buy's founder is offering more than $8 billion to buy out the troubled retailer, but can he succeed in reviving the company where others have failed? our experts will weigh in. interestingly, best buy one of the worst perform eers on the s. back in a minute.
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we've been following the j&j pfizer story about the drug being abandoned, also a similar drug being tested, so we're watching shares down about 2%.
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pfizer seeing the real impact. but it is elan of the j a&j pfir elan trio that has seen the most impact because this drug that was abandoned was the bulk of a pipeline. at this point. >> people talk a lot about housing being one of the pillars of the economy. cashin just talking about that. bmw sales up 5%. the first time they've sold more than a million units in the first seven months of the year. and it's a good piece in the times magazine over the weekend about how automakers are having to invest in 2015, which is the year they think they'll recover their post crash volume. the question is whether they can get consumers to feel as confidence as they are. >> so again, the slowdown in luxury. what slow down? ri richmon a parent of a lot of these brands. take a look at the casino
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stocks. very strong revenues, mgm is up by 8.8% on its earnings release, but also lifting the likes of lds and shares of wind resorts. nice gains across the board. worries about a slowdown in china impacting whether or not billionaires would go to macaw. >> one of the big stories out from yesterday, a company going to drop youtube as a standard issue app on the next generation of ios 6 at the ecosystems between apple get further apart. a couple of months ago, apple saying they're going to develop their own app and now with youtube out of the picture, apple getting close to some highs, which we think is going to be the iphone 5 on september
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12th. >> typically, a pattern is a run-up into a product release and easily, that could be september 12th. that has been the date that was put out there in terms of an unveiling of the iphone 5 in some sort of smaller ipod and ipad mini. of course, the second part of that story is that on the product release usually, the stocks sell off. so see how that plays out. >> the damage done after that disappointing earnings report was very, very short. >> then we continue to watch some of these key levels on a closing basis, you want to see us get to 13.279 on the dow. which would be the highest closing up since the crisis. basically, 99 points away and i'll bet you if that does happen today, then you'll start seeing some of the broader general media talking about what level
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these markets are at. >> when that is a headline, that's when companies may start pulling back. i said may. i said may. >> those stop at some point as well. but that's been may for a long time hasn't it. >> one can hope, david. one can hope. >> don't forget, we're having ta p pas. meanwhile, next hour of "squawk on the street" starts right now. welcome back to "squawk on the street." want to get the rundown for the next hour. richard schulze stating his claim to take the company private yesterday and can he do what previous foupders like steve jobs at apple? our management panel is lined up to break it down. >> and chesapeake's energies
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earnings conference call is underway, so ceo mcclendon offering leadership changes. >> plus, a big week for the ipo market as six public offerings are looking to come to market. we're going to sit down with a ceo of one of the bigger public offerings. tumi's ceo and a lot more. first though, boston fed president speaking to steve liesman in an exclusive interview this morning. steve joins us with some of the lie light. >> boston fed president eric rosengren saying he wants to see the fed do an open ended quantitative easing program. and he said he wants to trigger that to nominal gdp an perhaps even the unemployment rate. it would be open ended month to month. i want to bring you however parts of the interview we did not air. after we got done with the live
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portion, we sat down and taped some. i asked him directly about comments made by richard fisher, that the fed should not act now because of the perception it would be political. here's what he did say. >> we started out the year expecting we would have an improvement in the economy. we thought gdp would be gradually increasing. despite that forecast, we had a january sep that provided forward guidance for the end of 2014. we're now seven months past that and what have we found? we found that the economy actually has not grown as fast as we'd hope. we need to be politically independent. you should be focusing on economic outcomes and what monetary policy can do to change that. we have enough evidence to my view that the economy is not going to grow the way we had hoped and as a result, i think it is an appropriate time to take stronger action. a nonpartisan federal reserve
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should not be worried about the political cycle. it should be worried about the business cycle. >> what's your reaction to the guidance given out of the ecb's last meeting. >> seems like a reasonable start to a program that tries to get the programs the sovereigns are having under control. i think there's more steps they have to do and there's not going to be one solution. it's going to have to be a series of actions they're taking to get towards a more unified fiscal solution. >> do you have concern about the american financial systems with the european system? has there been progress made in ser severing some of those ties? >> i think there has been progress, but the stability issue should be something pol y policymakers should be attentive to. i focused on the money market funds to make sure that is not a financial stability problem. if we were to have a shock, not that i'm anticipating that from europe, but if we were, i think
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that's one area we'd need to do more work. i would say there are other areas similar to that. we need to be continuing to focus on financial stability, not the low in that we haven't had a recent large -- >> that additional qe would help the economy bring down mortgage rates and he did say, we cut out there, if the fed takes care of the economics, the reputation of the the fed will take care of itself. and just one note. that is not a tropical setting despite its beauty. that was the outside at the federal reserve bank of boston billing. >> i thought it was beautiful. sort of gave a whole japanese zen thing. >> wasn't there a rock garden? >> quite a nice little terrace they have there. >> rapunzel. thanks so much, steve. best buy founder wants to
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save his company by taking it private. will he be able to follow the the footsteps of steve jobs by trying to resurrect the company they founded? the senior associate dean at the yale school of management, the the marketplace editor for the wus journal. guys, good morning to both of you. dennis, you called the offer a nonstarter. why? >> even with the contribution of 20% ownership stake, very few private equity firms want to put in the capital needed to take this company to 10 billion. there's just not enough money to go around to finance this deal. i don't think it's credible. >> jeff, you agree? >> absolutely. there's a certain kind of ceo. they're called a general. they don't retire gracefully. they look for a way to restage their return and if steve jobs or michael dell or howard sch z
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schulze and starbucks, apple and dell, they can pull it off. really driven by a heroic aura, the vanity of it all. like harold gene of itt. he didn't have a vision. when he was the ceo, it was a disaster. brad anderson had to save it and sadly, brad anderson lost political votes. brought back in to replace brian dunn. geek squad, everything. >> part of the game plan is to bring back past management including brad anderson. >> should be the -- ceo without the shadows of schulze clouding things. >> we should keep in mind it's not just a shadow he brings to the table. it's 20% ownership of the company. so if you want to make a deal happen, you pretty much need his
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consent. i actually view it a little bit less in the eisenhower patton lens and more from a perspective of a guy who wants to save his investment. i view it as him trying to maximize omss. i don't think he wants to own the company. i think he's just trying to serve as much he can. >> you refer to eisenhower and patton. he was moth balled when he came out. same with mcarthur, churchill. all these guys who were the great heroes of the war came out of moth ball career status. so there is hope, if it wasn't for his own checkered past and uncertainty in the financing and the shadow, it's a shame. there would be promise with the idea that generals can work as long as they are driven by their
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own grandiosity. >> but dennis, you're suggesting that the entire bid is a ruse? >> that's a bit of a strong word. if you think about it from a game theory perspective, it is to have someone come in and take the company out entirely without him having to deal with private equity sponsors, and banks who might be expected to fund 6 to $7 billion of debt. >> who will come in? i guess that gets to the question of what can be done to best buy's business to turp the thing around or sell it off because i don't know what the solution would be. but why would a buyer come in to get on board in the first place? >> well, if you, this is why we've both come to the same dead end. it's too big. if amazon say were to buy it, it's too big of a chunk to take. there's one outside contender
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and that's carlos lee. he tried with comp usa. that failed rather miserably. on an economic basis, this company is too volatile. the earnings are too unpredictable. >> that's what they really need is someone who has the money and backbone, but also someone to invest in the technology. brian dunn cut back on any significant investments in technology. this notion of the genius bar, this is where brad anderson was goin. they had those kids at the geek squad. now, they're playing video games in the back of the store while you have this point of sale being done with knowledgeable people. >> jeff, it is possible that somehow, schulze's strategy has evolved and we're just not in on the second act. might be slim, but it's
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possible. >> there second acts in american live. has to be muted and handcuffed. as dennis reminds us with 20% ownership stake you're going to have, brian dunn's travel the past was being done on the former ceo's airline. now, i'm sure they were trying to work something out so there wasn't an overt conflict of interest, but it creates an illusion of a lot of conflicts. it's going to be hard for this board to harness schulze. this board itself lacks ceo backbone. they have some people, lisa, used to be hillary clinton's chief of staff, she's a very sophisticated person, but they need people who have been ceos of major companies to provide the guidance and backbone. right now, the active ceo who is somebody who had an unsuccessful history before at united health. they present him in their annual
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reports and releases as the former cfo, he had been demoted it appears and took on a business unit and didn't succeed there and was out of work. this is not a first. and that person has all these big visions of where the company's going. >> last word to you. does this company get taken private? is there a strategic buyer elsewhere or is it left alone to drift? >> i say no strategic buyer and i cannot quote neither a general nor novelist, but in the tale of best buy, i will say it's going to be sort of a long, slow, narrow end to perhaps they'll do a dividend recap, maybe give money back to shareholders. just trying to preserve his optionalty and we will not see general patton. >> i'm going to quote porky pig. that's all folks. good to see you guys. >> got news crossing the wires on jobs. rick santelli.
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>> for june, 105,000 positions. waiting to be filled. how do you get that number? the current read for june the 3.762. okay. million. versus last month, 3.657. difference of 105,000. we'll continue to monitor any way we can wrap our arms around the jobs market. melissa lee, back to you. pfizer and johnson & johnson deciding to halt trials. >> hi, melissa. pfizer and j&j reporting their phase three drug failed to slow memory loss in patients with mild to moderate alzheimer's disease. now, goldman sachs' analyst said
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if it would have been approved, it would have been a 5 to $10 billion drug. expectations were low. gold man saks estimate iing a l. a financial stake in this drug, is also moving lower, down better than 6%. eli lilly shares also under pressure. its drug also targets brain plaque, that sticky sub stabs stance that is said to be the underlying cause of the decide. >> at 10:45, we'll have an analyst's angle on this story. >> over to brian sullivan, get a market flash on this tuesday morning. >> good morning. take a look at fossil. maker of watches and other acce accessories. this stock is absolutely on fire. it's up 32%. they beat across the board guys. they beat on earnings, beat on sales. their guidance was good and gross margins were solid. fossil shares soaring today and in in fact, year to date,
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they're now 30% in the past month. they had been hit, so fossil shares far from extinct. >> so witty. that just fell on -- >> you've got to be careful. we will not come back to you again. >> i couldn't match your porky pig comment. you blew me out of the water. >> just don't try. >> yeah. try to compete. >> when we come back, it was a big day in london for usa men's hoops and women's soccer. we'll get all the highlights after this break.
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women's soccer men's basketball. michelle caruso-cabrera is in london. morning, michelle. >> yeah, it's exciting, carl. a great night last night. the medal count, china in the lead, but barely and then great britain back in third place. just behind the united states. they had been fighting back and forth with russia when it comes to the total medal count. team great britain still having a great olympics. a nail biter in women's soccer last night. first, the 90-minute game, then 30 minutes of overtime, then
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three minutes of injury time and then finally, alex morgan's head er gave the u.s. women a 4-3 win over canada. now, the canadians say they were two bogus referee calls. no matter, the u.s. facing japan on thursday for the gold medal round. now, the u.s. basketballargenti night. apparently, they were pretty bad sports about this game. after letting loose a three-pointer, carmelo anthony, the victim of what looked like an intentional cheap shot, a replay of the action reveals him sticking his arm out as anthony comes down, jabs him in the groin. the arrogance of the argentinans knows no bounds. ridiculous. this is the first truly social olympics. usain bolt, he told everyone he was going to bed early after his
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big win the other night because tonight, he still have the 200 meter race ahead of him and then he tweeted out this photo. at 3:00 a.m. hanging out with three swedish handball players, so apparently, wasn't resting that much. now, andy murray's girlfriend tweeted out this photo of his dogs, each wearing one of his medals. isn't that cute? maggie may, cute british song and the daily mail has an sclooef. time for some true gossip. michael phelps apparently has a no longer secret girlfriend. he is dating a 27-year-old aspiring model. that means she is she isn't one. she is from los angeles. this has been going on for six months according to the paper. since they met at the nightclub where she works, the daily mail had photographs.
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there's a lot of action that's happening now off the field as the games start to wind down and athletes after athlete starts to win medal and they can relax. you'll be shocked to reveal the girlfriend is blond. back to you. >> i saw him on "today" this morning saying he's not going to compete again. i never made it there. i'm sassuming you have. >> i haven't, i'm shocked. but i haven't. i might try now. they've apparently allowed a lot of the athletes in and the papers here are filled with a lot of photos, some of which we can be the can't show you. people mooning, things like that. >> yeah. >> wow. >> they're 19. 20. you know. >> and they're athletes. i mean -- >> it's true. the things that happen in olympic village. it's absolutely true. up next, a read on
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commodities. back after a quick break. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter. orgdoes your cauliflowernic have a big carbon footprint? not at all. that's great. melons!!! oh yeah!! well that was uncalled for. uhh... mr. gallagher. incoming!!!
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australian miner report earnings tomorrow and china will release data later on. what is your play? bring in tim seymour, tim, always good to see you. >> how are you? >> good. haven't seen you in a while. are you in this trade and what are you expecting them to report tomorrow? >> commodities space has clearly rallied along with markets. some of these names have been so oversold that you've seen the best rallies this steel, iron ore and coal names. i think the numbers are not going to be good for those looking at near term prospects. the reason we mentioned china is because china is going to release cpi, which is expected to come in around 1.7%, down
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from six and a half a year ago. meaning chinese policy has a lot of room to stoke the fire. we've said many times, not going to be like 2008. but primarily an iron ore producer. steel prices have not rallied here. if you look at the crb and move off the lows, which is very impressive off the last two weeks, it's not coming from the component that people want to see here. >> so, at the end of the day, china has indicated that it stands ready to do more and that's what the expectation is of a lot of china strategists. if the cpi comes in weak, what sort of market reaction do you expect on the back of that? do you expect a rally because that would further the belief that china would come in and give the economy more stimulus? >> correct. many people are waiting for the number as at least another support valve for china to make
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another rate cut. we've noted they've cut twice in the last six weeks. if you're playing this here though, i don't know they're going to be able to tell you a lot on outlook. even though i think china is reheating the oven and i think that the fourth quarter in china is going to start to bring new steel production online. that will be supportive. they're not seeing it here. i would be taking profits in a lot of these names that have run 20 or so percent. they're not going to tell you anything tomorrow that's going to tell you their business has changed. >> tim, good to see you. and you can catch more global trades from tim every weeknight on fast and tuesday's here on "squawk on the street." fast money at 5:00 returns next monday. tumi trading higher after a very strong second quarter. what's the ceo have to say about that? he'll join us live right after
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one hour into trading here, 7:31 on the west coast.
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10:31 on wall street. dream works set to open a theme park in shanghai by 2016 with a total investment of about 20 billion. on to earnings, posting better than expected while raising full year outlook. cvs reporting revenue jumped to $37 billion and lastly, a massive fire struck at richmond, california refinery yesterday. chevron reporting today that the fire is now contained, but not fully extinguished. >> want to go to chicago for more on the markets' latest moves. ira, good morning. >> good morning. how are you? >> good. getting awfully close to some interesting levels on both stocks and bonds. i'm wondering if it feels to you or any of the men and women on the floor that the tone is
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different or is this just auction talking? >> no, there is a different tone and what we're starting to feel is the presidential tone. we've got the carry over from the non farm payroll. we know that europe down the road, we're going to see the ecb do something, so it did change the the tone, however, we're in the dog days of summer. the volume on the floor, light as can be. not a lot of noise. after the rally yesterday and coupled with the rally today, i wouldn't be p surprised at the end of the day to see the market come down a bit to where it's at right now, so i'm looking for the markets to set back a little bit here, but i think we've set a different tone just as you said. >> merrill's out with a note. interesting. relatively bullish on the ten-year, but they say a break about 167 would force them to abandon that view. are there levels that awould force you to revisit any thesis you have in operation right now? >> there might be. i think that we have to focus on what the fed's going to do in september. and i look at this as no more
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than a rest bit. we're hoping for the fed to do something this august. they did nothing. we're seeing a setback a little bit and i think from there, we are still going to see as we go into the set fomc meeting, the the market come right back and i wouldn't be surprised to see the market come back near the contract highs, so i just view this as noise in the market. there's a lot of auctions going on this week. we're throwing out a lot of money. yields are going to have to go up to attract the bidders and after that, i like for the market to again look at the fed for a quantitative easing program. >> how much of the rally we've seen this year, 15% on the nasdaq, 11% on the s&p 500. how much of that is anticipation of that qe3 so when the fed does announce in september, we don't see much market movement because we've built that in? >> i think that is built in and i think at the beginning of this year, it was funny. in my office, i said money managers should go away.
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they have their whole year made by march and people were laughing saying listen, if you're being paid on return and have got 10, 15% on the first quarter of the year, where are you going? i think that wasn't bad wisdom. now, you start anticipating the presidential election and i think the market is doing that as we're talking, but a big rally, no, i'm not viewing that just yet, but i am looking for a bump into the election and i think that's what we're starting to get. we're starting the prepare ourselves for that bump going in. >> good to talk to you again. thanks a lot. >> a busy week for ipos. that leaves six companies expected to list. we want to take a closer look at one of the big es public offerings from this year. tumi, the luxury luggage company trading higher this morning after second quarter earnings beat estimate. shares are done about 25%. here for a cnbc exclusive is jerome griffeth, ceo and president of tumi.
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it is great to have you with us. not only did you beat on eps and revenue, but also raised full year 12 revenue. you're one of the few companies in the earnings season, particularly of consumer goods that have been able to actually say we have the visibility to raise our guidance for the year. what are you seeing that other companies may not be? >> we have a relatively small base. our retail business has been very good. and in a lot of cases, we've been exceeding expectations, so since we have a small base, we see we have the opportunity continue to improve and grow. >> your margins have also improved. what are the leavers that help you do that? >> it's less promotional activity. we cut down on some of the promotions and the the consumer has taken to it well. since we are a premium company, we see the ability to continue to upgrade and consumers react well to that.
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>> who weat are your consumers? if we take a look at, you mention you're a luxury brand. help us understand who your customer is. >> generally, someone that's very well educated. 100% of them work. in the mid to high income brackets. about 56% are male and 44% are female. all traveling and all in business. yet with the influx of the internet and our internet business has been quite good, we're seeing a younger consumer. generally, two-thirds are 35 and under and about 70% are female since there are more females going into college last year and this year as well, we have to adapt our offering to a more female business oriented consumer. >> is the decision to purchase, does it pivot around an upcoming trip or is it about i have a new job, i'm going to need a new bag? >> it's interesting. we started out as a luggage company. over the course of time, we've really gone more into being a
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lifestyle brand. luggage today accounts for less than 25% of all units we sell, so we're selling more accessories, business bags and have expanded to other categories. small leather goods, eye wear and we'll continue to expand. >> why would you pay $5.5 million bond for a successful completion of ipo? they're probably wondering why should we be paying this guy $5.5 million for the ipo? >> during the process when i was coming into the company, it was in the middle of 2009. there was a lot of uncertainty, so it came in with how we negotiated the contract. we don't know, maybe we would sell the company, maybe someone else would take it over. >> so, as part of your contract at the time in 2009, that if the company went public successfully. i don't know what defines su
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succe success. i guess this does? >> we went public, got a good market valuation. now, we're trading at a pretty equal level. >> but now that you're public, selling the company is not necessarily off the table, is it? >> not necessarily. but it's not something that's really in our sights. quite honestly, i spend most of ti my time continuing to grow the business. there's so many opportunities out there for us. 100% of my time is focused on continuing to help us grow. one of the reasons i was attracted to the company was because it was small. had a great brand name. as we continue to deliver good, quality products with great design and innovation, consumers continue to flock to us. >> any difficult spots in china or southern europe? >> i have to say honestly, we had that question yesterday on the calls after our market call and there really hasn't been. our asian business still continues to perform well and it's because we have a small base. we are in over 70 countries
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around the world. but everywhere we are, it's quite small. our largest country is america and we feel we have the opportunity to really grow in business. >> we mentioned luggage is less than 20%. >> less than 25% of items sold. is it the biggest? what is your biggest product line? >> as far as units sold, generally, briefcases. it's interest iing to see the trend today as people carry less and less paper and computers. they're going to ipads, notebooks, so everything people are carrying, they want lightweight. smaller sizes. they want to make their life easy. >> where are you manufacturing? >> prior to 9/11, a lot of the manufacturing was done in the united states. after 9/11, a lot's moved over to asia. currently, we're trying to move some back to the western hemisphere. we're working on bringing our latest development back to the u.s. because the fabric is actually made in the states. >> so you think you bring back some jobs, actually.
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manufacturing jobs to the u.s. >> it's going to be on a small level. but really it makes sense for us. the lodgistics, the timing, the cost of shipping things back and forth. it just makes sense. >> i've carried the same tumi backpack for 12 years. has anyone ever done a study on the average life span? >> more ad hoc. i've gone through a repair center in georgia and there are things there from 20, 30 years. >> i've tried to destroy it, b i have. >> you can try, but we can still go back and fix it. our consumers are so loyal, we'll say this bag is so old, we'll give you a discount. in almost all cases, they're like, no, i like that bag. i want that bag back. somebody asked me once, gee, isn't it bad you're making great
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quality products because they don't wear out. so what you're telling me is that's a competitive disadvantage to make good things. >> like a maytag repairman. >> thank you very much for the time. >> let's get a quick market flash. brian? >> that was great to hear maybe some jobs coming back to the united states, guys, but i'm going to switch gears over to broad soft. not a well-known company, but maybe after today, it will be. up 30%. 46% in a month. they beat on sales, earnings by 12 cents. i'm trying to figure out what they do. they're one of these cloud and software companies that sort of operate under other software, if you want to get text messages on a land line phone at home, they would help you do that. they're in the consumer and corporate space, but broad soft absolutely killing it today and this month. back to you. >> thanks, brian. meantime, chesapeake energy's conference call wrapping up in just a matter of moments, so did the ceo hint at any leadership changes? we'll have the latest, next.
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chesapeake's conference call wrapping up, so what did the ceo have to say about nat gas prices? kate kelly has the latest. >> the call lasts over an hour this morning with most of the commentary focused on core business issues. cap ex, the driller's dramatic shift from gas to liquids like oil and asset sales. little time was spent discussing the hot button issues with no talk of aubrie's plans and passing mentions of a board featuring new faces. chesapeake posted earnings of
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six cents. under pressure, it has had to really hunker down and reduce its debt load through many of its natural gas plays. there was a whisful quality to mcclendon as he reflected on his company's years, which he feels has helped transform the market in favor of a cleaner energy that he passionately believes in, but the market has spoken and battered gas prices contributed to a rare $212 million net loss on chesapeake's own activities. going forward, the company is looking to stay north of $3 per unit in the rest of this year, speaking of gas prices, and he thinks things could swing far higher next spring if the glut turns to a deficit. >> clearly, you're going to have to have higher prices than $3 in 2013, to incentivise producers cot
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to come back. it's got to be a healthy price to pry our rigs away from our liquids production. this has been a four-year down cycle and a lot of head winds the last four years, but we think a multiyear upcycle is now underway and frankly, all the die has been cast. been playinged and now, it's just a matter of physics and time for them to play out. >> so, i thought there was something almost literary to that sort of commentary, you guys. mcclendon's been such a huge believer in natural gas and he's having to put his money into oil. it's just an interesting turn of events. now, he's still focused on gas as well, but as he says, the economics are such it's going to be tough to take those rigs and redirect them back to gas unless they get he said at another point, $5 per british thermal
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unit more than that. >> a lot of turmoil for this company over the last year. no doubt about that. stock up 10%. any discussion about asset sales, which still figure prominently? >> absolutely, i would say that was a focus on the analysts on the call. there were a lot of questions about all different asset sales, including the perm yan basin sales, something they're still working on. a lot of discussion about mississippi live, in oklahoma and kansas. they're really trying to off load a lot of their natural gas plays and to a certain extent, gas, but they talked about having, i hope i'm right on this with my memory, about 100 different rigs coming in 2013, but only about eight of them will be dedicated to dry gas, so that really tells you to the degree to which they have shifted away from their core competency. >> thanks so much. what a turn for the company.
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the 52-week low was 13 and change. now, it's 19. significant turn around in this stock at least. pfizer and j&j announcing they are discontinuing trials after the drug failed to meet its primary goals. we'll talk to an analyst for his take, but first, rick santelli, what are you working on next hour? >> i think i'm going to try to find some air tank, maybe some snorkelingquipment. i think we're going to call it under water economics. whether you're under water on your house or your gdp, the best thing to do is you know, manage rates. put those rates low. that changes everything. you instantly become dry. not. we're going to talk about why it's such a silly idea all at the top of the hour. so uh this is my friend frank and his, uh, retirement plan.
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we're keeping a close eye on pfizer and johnson & johnson after the firms decided to halt
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trials for its alzheimer's drug. the second clinical trial failed to show improvements in patients. joining us is mark shownen balm. it was supposed to be a billion dollar drug. walk us through the financial impact on both companies. >> sure. so bapi is a drug that was in big human trials for alzheimer's disease, a really terrible disease, obviously. unfortunately for patients the drug failed. however, wall street expectations for this drug were very, very low. the alzheimer's market is large. if these drugs had worked, there are other drugs, it would be a multibillion dollar class. wall street analysts only include about a billion dollars in sales in the model for it. which is only a fraction of what they could be. that was our way of adjusting to the risk involved in clinical trials. if you're to take that billion dollars out of pfizer estimates, it would reduce our fair value
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for the stock to the tune of around $1 a share. we're seeing a stock option today of less than that. only 40 cents. which i think is telling you expectations were quite low. the impact on earnings per share is immaterial, less than a dime a share of earnings in the out years. eli lilly also has a drug which we should see data for sometime in the next four to six weeks. very similar drug and obviously expectations for that now are quite low. >> right. we're seeing the stock trade off on that. as i recall, mark, eli lilly was one of your top picks going into this year. does it remain that? or does what happened to pfizer and j&j's drug impact how you view eli lilly's chances of getting its drug passed? >> it really has not been one of my top picks although it has been a good stock. my top picks in pharma have been merck followed by pfizer. lilly has been one i've been waiting for the data to perhaps
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become more positive. i think in a worst case scenario lilly is worth probably mid 30s. so if everything were to go wrong for lilly which it wouldn't, the stock would be in the mid 30s. now its valuation, i think now that this data point is out of the way, it does clear the road for perhaps getting more constructive on the stock. good company, but not one of my top stock picks right now. for a lot of people out there, this decline in shares of pfizer down 1.7% at this point it's still less than its 52-week high. is this an opportunity to buy or was there too much built into the stock going into the clinical trials? >> no i think it's a very attractive investment. the management team is making moves all the time to try to enhance stock price. number two the pipeline at pfizer has improved dramatically over the last several years and over the next few years we'll see more data for that. and most importantly, just
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valuation. when you look at a stock. i think in a worst case scenario pfizer might be worth $20 a year that is if you remove all experimental drugs from the valuation analysis. the risk/reward so to speak is very attractive near. near-term they're going to be launching hopefully a new arthritis drug sometime in the next several months. i think has a chance to do a little bit better than what people are thinking, and with their partner bristol-myers squibb could be launching a new blood thinner around the end of the year which could be really exciting. a lot to keep people interested in in pfizer all set on the foundation of a stock that's still relatively cheap. >> mark, great to speak with you, thanks for your time. >> tweet time on this tuesday. are presidential candidates really just like us? this photo of mitt romney taken at hunter's shop and save supermarket in wolfboro, new hampshire. he's getting pepsi, yogurt and water. >> greek yogurt
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time for squawk on the tweet. are presidential candidates really just like the rest of us? this photo of mitt romney was taken monday at hunter's shop and save supermarket in wolfboro, new hampshire. and we've learned in the shopping cart wild cherry pepsi. not just regular. greek yogurt and water. we're asking, you though, to caption the image, right? wind surf tweets, i have to remember what milk costs. anthony tweets, i tried but i still couldn't spend my whole paycheck. and paul tweets, mitt bringing cash back onshore. you know they great grief for whatever they do. >> it's amazing the perceptions about candidates. i mean, mitt romney made his own -- i mean he worked hard for his money. >> it's true. meantime s&p sitting at levels 1403. 1422 is where you want to get if you want to get that post-crisis high. we'll see if it happens today, the trend's your friend as gary said on the show yesterday. >> if he said it i believe it. >> he said that so convincingly. i don't believe it because you
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said it that way. >> you don't believe it? >> oh, come on. >> in the absence of any news or expectations out of europe, maybe light volume market. >> and you're right to shine a spot light on it. we've had a significant rally. >> we have. >> over these last few weeks. >> see you guys later. >> all right. >> if you're just joining us, here's what you might have missed earlier on this morning. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> knight was a superb firm before this unfortunate glitch. it will be an incredible film after it. certainly the investors that -- that came in to this are going to do well. >> my expectation is the second half of the year won't be much better. so given that we're only treading water, that's the reason why i would advocate for a more accommodative monetary policy. >> the decline in standard chartered london trade. the biggest decline in almost 24
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years. now the concern is, will there be fines for standard chartered? will top managers start quitting as we saw at barclays. and those are all big questions for investors who are in a stock seeing a 20% decline this morning. >> i think it's a bad idea. i don't really understand it. i mean, first of all, social gaming was a craze for all about two years, maybe a year and a half. and it's under pressure. >> there's the opening bell and a look at the s&p 500 at the top of your screen. >> i view it as him trying to maximize his options so maybe, maybe someone will come in and buy his company. and in the end i actually don't think he wants to bone the company. i think he's just trying to preserve as much value as he can and try to get an option going. in these circumstances i think it's very hard. >> our retail business has been ve good. our international business has been very good. and in a lot of cases we'vebeen exceeding expectations. since we have a small base we have the opportunity to continue to improve and grow.
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>> good tuesday morning. live here at post nine at the new york stock exchange. let's get a check on the markets. not too far away from some post-crisis highs. you want to see 13279 i believe. but for the time being dow is up 72. nasdaq up 24. s&p up 9. drug store chain cvs care mart 56 cents a share. cvs raising its full-year guidance as it continues to benefit in the recently resolved dispute between walgreens and express scripts. from drug doors to big box retailers, they've downgraded the rating of best buy to junk. one day after best buy founder richard schulze proposed a plan to take the big box private. good hour shaping up. amazon already taking on the likes of apple, netflix, best buy and now zynga. so with amazon no longer going the route of everything but the farm is the quest to take on zynga a good move for the e-commerce jaegiant.
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and apple looking to clock in with yet another new all-time high as the tick titan just yesterday announced it's dropping youtube from its standard ios6 and charging ahead with the battle against samsung. how much longer can it hold the reign at the top? plus you hear all the hype about the excitement over the olympic games. but what about the economic drawbacks? we're going to take you live to london for an inside look at the downside to hosting the olympics. in just a few moments. first a quick market flash. brian sullivan is back at hq. >> a developing story out of new skin enterprises. nus is the ticker. the stock is down 10%. here's the story. ll known short selling firm cintron research essentially saying that it thinks that nu skin's china business could be completely at risk. apparently china bars direct selling. multilevel marketing companies of which nu skin is considered one. and you'll forgive me for
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reading here but cintron search's note on nu skin says it is the opinion of cintron research that nu skin is grossly violating the laws of the people's republic of china and their entire chinese business operation could be in jeopardy of seizure and other substantial risk. so cintron research slamming nu skin enterprises with that note today. i have a call in or a note in to nu skin. i'm going to pick up the phone right now and give them a call. if they respond i will certainly get it back on the air. that stock getting absolutely whacked right now courtesy of cintron research. >> thank you very much for that. it was 24 hours ago brian brought us the news of standard chartered tumbling in overseas trading today. new york state regulators accused the bank of hiding $250 billion in transactions tied to iran. the bank was ordered to show why its license to operate in new york should not be revoked. and for its part the bank says the accusations, quote, do not present a full and accurate picture of the facts, but as you
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can see the stock down almost 18% in overseas trading. back to amazon's move to tackle the likes of zynga. julia boorstin with the latest on a move that took some people, at least, this morning by surprise. good morning, julia. >> good morning to you, carl. well the headlines are all about amazon launching its first facebook game and its first social game studio. what ts is really about is amazon trying to beef up its game options for the kindle fire. amazon is giving away the facebook game called living profits for free but will charge for virtual goods which could generate some revenue. it's more important as part of the larger gaming strategy. last month it unveiled a game circle of platforms to connect gamers with each other just like zynga's new gaming platform. this is more bad news for zynga whose stock has been hammered down nearly 70% so far this year on concerns about slowing growth. but this could be good news for facebook. the social network takes a cut of all gaming payments on the
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platform. there are a lot of questions about the social gaming model and whether or not companies like zynga can convince more gamers to pay to play. so we'll have to see if this ends up being a good financial move for amazon. whether the investment pays off. >> julia, thanks so much. and for more on amazon's move to take on the farm, let's bring in mark ma haney u.s. internet analyst with city research. good morning. >> hey, carl. >> people are making jokes what's next? making tanks and defense equipment? is this a bridge too far and why would you wade into an area where even a well-known name like zynga is having trouble making money? >> i think their big picture here for amazon is this has gone from being a retailer to a marketplace business to a cloud infrastructure business to a device business and now they're going into the media segment. put this in that kind of context, which is they are making bets in video, making bets in books and now they're making bets in social games. all of these areas they have an
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extra play on which is through a device strategy, something that makes that device more valuable. fas long as it's a small bet it's okay. a big bet could be risk to the stock. >> can you operate in the space in a small way? for instance zinga's strategy as we all know requires a large number of games because only a few are going to hit. seems like it would be a difficult area to simply wade ankle deep. >> look what's happened with zynga year to date. over the last year the correction in that company's fundamentals. we the correction in that company's fundamentals as gaming has rapidly gone over to mobile as the platform king in that space has played around with the extent to which zynga games show up for users. that's a highly volatile sector. so you want to make that bet small target. the one major advantage that amazon has is it's got this huge platform. it's got the ability to promote
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games in a way that very few other companies can. if they get a hit they can juice it up very quickly. >> in the halls of zynga today, i would assume you suspect there's reason to be worried? >> yeah, we would view this as an incremental negative for zynga, not that they need too many more incremental negatives. this is one. just more competition in the space. another company with a lot of resources. and a device strategy to boot, which zynga would not have coming after this space. >> amazon, of course, has made no secret of their willingness to withstand, i don't know, losses in the short-term, margin compression in the short-term. a high level of investment that maybe the street's not happy with. is there a bridge too far for you on that front? does your patience eventually wear thin? >> yes, sure it would. we've gone through one major investment cycle with amazon before. that was in '04, '05, '06 when the margins went down to these kind of current levels. the stock got trashed. what came out of that was a huge number of investment hits by
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amazon, including the kindle. amazon web services. the third party marketplace. so they've shown they can invest well. they are going to take a long-term view. the near-term relief in the stock and the reason the stock's outperformed is they proved over the last three quarters that they've now reached margin stabilization. the margins are going to gap up quickly but at least it doesn't appear they're going to descend further. were it to go negative, that would change the view on the stock. >> priceline tonight obviously a high flyer. what are your expectations and do you see any risk of what's happened to some other big players and a swift reversal for whatever reason? >> it can always happen. the big risk with priceline is europe. this company more than any other internet stock has and any other internet company has dramatic exposure to europe. 60% of revenue. a lot of euro and pound exposure. that's why the stock has traded in. we've been a consistent buyer of the stock like with amazon. these kind of pullbacks are the buying opportunity in the stock.
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we think they're going to do something like $7.30 in earnings tonight. the core story behind priceline the ability to sell more hotel rooms globally we think is very much intact. >> mark, appreciate that. mark mahaney out of san francisco. >> thank you, carl. >> thanks so much. >> let's get to our capital markets editor, gary kaminsky has thoughts on morgan stanley. >> not just morgan stanley, carl. one of my colleagues left right on the camera shot, celebrating a birthday here today, says he wants to listen. that's brian steele by the way. carl yesterday barclays was out talking about this joint venture, morgan stanley smith barney and estimated there may be a $6 billion charge that citi will have to take when the value of the pieces is independently appraised given the fact that morgan stanley believes that this business is worth $9 billion. citigroup believes that the business is worth $22 billion. quite a wide bid/ask. let me explain to you why i don't think the real issue is about what citi may have to write down but why morgan
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stanley given the circumstances surrounding what's happening in the business right now, is going to ultimately be the winner here. and there's four things that i want to point out. right now, this business is on under significant pressure because net interest margin is upside down. anyone who has a brokerage account knows that you're not able to make it where interest rates are the type of returns in customer accounts and the cash balances that you did years ago. there are 16,000 brokers in this joint venture, morgan stanley smith barney. my guess is probably 1500 of those 16,000 are the real producers. and as they get rid of more and more brokers, which they will unfortunately, those assets aren't going to leave the firm, they're going to move to the producers. higher fees ultimately. the joint venture integration is still in question. so in terms of have they been able to achieve what they wanted? not at this point yet. and more importantly lower fees continue to plague not just this joint venture but the whole industry. at the end of the day the value will most likely after september
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7th be on the lower end which means that morgan stanley will be able to buy the additional remaining piece that they have to at the lower end of the value. so who ends up winning here? i will have to say from a disclosure standpoint carl i happen to think the guy happens to be a great manager, greg fleming over at morgan stanley who will be the person responsible for ultimately executing on this, greg, if he's able to achieve let's say $2 billion to $3 billion in profits from this division, sometime out. the wealth management being the crown jewel of what this entity is, forget about what citi may have to write off. focus on morgan stanley, this could be $25 a share of value for morgan stanley so forget the rest of the business if you are looking out at this thing three to five years down the road, not three to five minutes down the road. >> interesting. i mean, greg is a well-known face on the street. so you're saying if you ran a fund today you'd go long today? >> i'm sorry say again? >> if you were running a fund today you'd be going long ms
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today? >> that's sort of a -- that's sort of an open-ended question. my point is that if you are focused on what my happen, with this wide bid/ask that everybody's paying attention to, and if i own morgan stanley, i'd be more focused on the fact that morgan stanley is applying a business at the right time at the low end of the valuation, as opposed to what citi may have to take. that's a good way of answering the question without necessarily avoiding the other question, carl. >> i'll take it. >> and i'm hoping mr. steele understands. i'll go ask him. happy birthday, brian. >> give brian our best. talk to you in a bit. let's get over to chicago and the cme, rick santelli with the santelli exchange. good morning, rick. >> good morning, carl. underwater. you know, when i listen to the interview this morning and steve always has good interviews with fed officials, whether you agree or not, they're interesting. these are powerful people. but the notion that underwater anything can be improved by a
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lower rate, and i'm sorry, it just seems ridiculous. if you're upside down on your house and i said this during the february 19th rant, you can give people that are underwater on their house negative interest rates, they're still upside down. it isn't an interest rate problem. it isn't a funding problem. it's an insolvency/credit/bad collateral problem. so why would the logic be any different if you moved it up to countries! let's look at some gdps. all right. these are the last four quarters of gdps and i listed them by strength. these are the biggest developed economies. so you could see, the largest, the whopping largest of them all, of course, is the u.s. we have the best, most resilient economy. it keeps coming back, despite many programs that i would say are useless. 1.5. but you do see a couple of quarters ago it was at 4.1. a couple quarters ago it was at 1.3. so obviously these programs do
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give you these little sugar buzzes. japan, well maybe japan's a special case, listen i'm not one for excuses but the tsunami is an issue. and it is coming back a bit. now let's look at the european countries here. the best of the european countries is germany at 0.5 but they did have a minus quarter. canada 0.1. but here's the ones i really like to concentrate on. here's france bumping along at basically zero. the uk 0.7. and i know they have olympic excuses but unlike japan i'm not buying them okay because the general economy also should find some improvement with all the tourists and the spending that is over there. if you look at the italian economy, you know, i don't know, nobody said it and i know it's a bad word, but you know what? i'm going to say it anyway because when i started trading two quarters was recession, four quarters was a depression. you have four quarters here. spain, well you know i guess zero is a special case. but they have three quarters. but here's the neat thing. other than germany, every
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european economy here, the best, the best we have is a goose egg. the best we have is a goose egg. so now let me get this straight. we're going to make this better, even though we never talk about it, we never talk about these gdp figures. but, by pegging interest rates in an artificial way through quantitative easing we're going to make all that better. right. back to you. >> some ugly, ugly numbers rick. talk to you in a few minutes. thanks so much. when we come back, what's one of the biggest drawbacks of hosting the olympic games? we're going to take you back across the pond to talk about the slightly darker side of london 2012.
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cities often tout the economic benefits of hosting the olympic games. but is there a much larger downside than meets the eye? we send it back to michelle caruso-cabrera who is live in london and it is a long-standing debate about whether it's worth it, michelle. >> yeah, absolutely. and it continues right here in london. often countries when they bid for the olympics they sell it to their people on the premise that it will be an economic boost. infrastructure jobs that come from building all the structures that you see behind me. the spending that will be done by the thousands and thousands of tourists that come. and, in fact, uk retailers were told that there would be a boost
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of nearly half a billion dollars worth of additional spending by tourists. there are growing doubts, however, that those numbers are going to play out. the reason? the locals have left town. the tourists are out here in the east end of london, central london is repeatedly described as a ghost town. we have seen that ourselves. numerous stores are advertising big sales to try to get people in. the ceo of nexus, a department store in london, said during an earnings conference call just this past week that the games, he thinks, have actually hurt sales so far. the complaints have gotten so strong that the deputy ceo of the london chamber of commerce wanted a media blitz to say that when all was said and done, retailers would see a net positive. now we speak with an outspoken member of parliament. he also has his doubts. >> in the west end of london, and look, there's no one there. and go outside london to places like weymouth where the sailing is taking place and that's a big holiday resort and this time of
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the year with the school holidays and everything else, every guest house, every hotel would have been full. they're all empty. so the net effect financially is not going to be good for the country. but i'm quite convinced that when we get figures for this quarter we'll be a bit surprised about the lack of spending. certainly in the west end of london. but hey, you know what? for once, money isn't the biggest factor. we put these games on. we've done them terrifically will and our athletes are succeeding. i've never known the country in my whole life to be more upbeat and optimistic than it is right now. >> so he's saying the tradeoff is worth it. now what is selling well? olympic souvenirs. there are frequently long lines of the official olympic stores right here in the park. by the end of the day the shelves look sparse. they have very limited sizing and availability on some products. so that's doing well. and then you know the next morning they are restocked. we're going to have a lot more with nigel farage. he's very opinionated about the eurozone experiment which he
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believes is a big failure. >> interesting. so hard to get a handle on what the third quarter may look like. this was an opportunity for at least cameron to say, look, invest in london and in britain for the long-term. but, we won't know what the answer to that is for some time. >> yeah, and i think in the end it ends up being a lot of replacement money. the people who would have been here leave town. and then you get tourists, instead. so it's a shift. i think it's going to be debatable as to whether the pile actually gets bigger. >> well you're right about central london being empty, and we went to dinner and we had no problem getting in just about anywhere. thanks so much, michelle. still to come, apple getting closer and closer to hitting yet another new all-time high. look at that chart as the amazons of the world look to gain market share on a daily basis. how much longer can apple hold its rein at the top? [ male announcer ] it's a golden opportunity...
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congratulations you are our one millionth customer. people don't like to miss out on money that should have been theirs. that's why at ally we have the raise your rate 2-year cd. you can get a one-time rate increase if our two-year rate goes up. if your bank makes you miss out, you need an ally. ally bank. no nonsense. just people sense. dow is up 62. got another market flash with ryan sullivan back at hq. >> carl. take a look at church and dwight, new jersey based company. the stock is down big. cut about 9%. just under that actually. the companying coming out and saying that earnings growth fell. concerns about mow he lower
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margin items. also the forecast was fairly weak at least as compared to 2011 numbers. so that stock is getting hit today. it's also down about 11% this month. the company better known for sort of boring products like arm and hammer, but carl, i figured you'd be happy to know this because i know you're an avid reader, the company says its trojan business is doing well because of "fifty shades of grey." they've got a new line of adult toys, and those are selling briskly apparently and the ceo in the conference call moments ago said he credits the "fifty shades of grey" phenomena with the -- with the endorsement of said products. >> okay. hey. we'll take it, right? >> a long way there arm&hammer. >> p&g has nothing like that i'll tell you right now. thank you very much, brian sullivan. bells getting ready to sound across europe this morning. all the details on the impact here in the afternoon session in just over three minutes. e got m. i had three kids.
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markets closing across europe in just a few moments. what an interesting few days it's been. shares edging higher again in a pretty volatile session. despite some worse than expected factory orders from germany and the news of the standard chartered scandal discouraging investors, here's a look at europe at the close. three straight days of good gains for your overall. the uk bank, by the way, sliding almost 20% after accusations that it hid $250 billion in illegal dealings with iran for
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more than a decade. the euro, though, seeing some gains on signs that europe is getting closer to resolving the debt crisis, even as the economic impact worsens. oil prices enjoying some gains, as well, on supply worries stemming from maintenance in the north sea. tensions in the middle east, and the hurricane season in the gulf. as we await the european close -- bob? >> is this the most hated stock market rally in history? everybody, everybody hates the stock market. traders hate the stock market. traders are short the stock market. talk to the public market they don't even think there's been a rally this year. they think the stock market is in the tank because the economy is not doing well. in fact, we all know, the s&p 500 is up 12% so far this year. it's having one of its best years in a long time. why does everybody think everything is just so awful in the storm? well, because the economy is. but i just want to point out a couple of things here because
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that's my job. we're less than 2%. about 1% from a four-year high. forget three-month highs, i'm past all of that stuff. new york, something i watch the short interest on the new york stock exchange. how many people are shorting the market, betting things are going to go down? it's near a five-year high. everybody hates the stock market. but that's an indicator that the market might go up, because that represents shares that have to be bought back. you all know that. that's a classic contrarian indicator. august what i've been watching is the market leadership finally is inverting and keep hearing about all of these dividend paying stocks. we've been talking to sore in the throat about how well they're doing. but it's starting to invert a little bit. finally. you can call it a little bit of profit taking. it's not just profit taking because money is going into the other groups. it's expensive. dividend payers have been underperforming and growth and cyclical stocks have been outperforming. leme show you, this is what i do. i watch the nerdy stuff. here's big dividend payers.
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clasc big four. drugs, reits, telecom and utilities. s&p is up 1.6% this month. this whole selector is flat to down because people are taking money out of that and putting them into more cyclical names. what's a nick lickal name? look at anything that's in the coal business for example. look at anything that's oil or refining. this is for the month. 7%. construction and engineering up almost 7%. steel stocks up 6%. coal stocks up 5%. this is what i mean. there's a little bit of rotation that's going on. this is the kind of stuff you want to look for to show that professional traders start to say things are trading. are changing a little bit. okay so why are we getting a rally at all? i'm not saying the global economy is getting a lot better. most people are still very pessimistic of the global economy. but there is a widespread belief here coming from the u.s. and the ecb, the reinterpretation of draghi's remarks have been helpful. the global economy is still weak. watch this comment from the australian central bank this
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morning. they did not cut interest rates. they could have but they didn't. they said china the growth in china is not slowing down any more than they thought that's very important. these guys have an inside track. they follow this very carefully. they wouldn't make the statement if they didn't they that there were some signs of a bottom in china. let me show you what new york is going through. germany, did you see the close this morning? four-month high in germany right now. i don't want to make too much of it but it has been coming off and the euro, euro is at a two-year low just a short while ago. by the way, this is a two-year chart. don't want to make too much of it. it's a small move to come off. but it's been quite noticeable in the last few days. i guess the bottom line is look, next ecb meeting is september 6th. we're going to see widespread belief now that monty has -- monty draghi axis very much that
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mr. draghi is going to lay out a much clearer path to what they're going to do. in addition to what's going on with the efs with the bailout funds. so this is basically the idea that we're working on. we're seeing this modest rally go on. i think -- somebody should stand up and yell about it. >> well you're getting a good start on that front. it feels like the turn was draghi turning his attention to the short end. >> it was. and by the way, the immediate response was very negative. we all sit around and try to convince ourselves, wait a minute we're looking at this the wrong way. maybe it was the triumph of the doves or the bulls because the initial response was definitely negative to draghi. in second look at it he did lay out a much clearer path of what they want to do. he's an economics professor, you know, that's out there essentially, monty is an economics professor as well. >> all right bob. we'll continue to watch it. bob pisani.
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gary kaminsky talking chesapeake. interesting comments. >> we haven't spoken chesapeake in quite some time. i see the stock up about 10%. looks to be a short squeeze. i'm kind of looking for the release, listen to the call. read through the transcript here on the call and this is what surprises me. why are people surprised that mcclendon, now that he's -- by the way it was never hedging, it was trading. i love how they call these hedging programs, they were essentially taking positions. now that they are net long the commodity nat gas he is bullish on nat gas i mean he's that news. is that a surprise? of course it's not news. he is making a bet that the nat gas price commodity price will continue higher. the fact they're going to do asset sales a good thing. remember with asset sales as we pointed out several months ago. asset sales are great when you're delevering a levered balance sheet assuming you're going to get the price. little caution here if you're making the assumption that
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mcclendon knows anything more specifically about the commodity natural gas spot price than you or i, i'm going to beg to differ. and as far as supply coming down, we know that the industry ishronically oversupplied. if the commodity stays up will see a lot of supply come back on the market that may have been shut down temporarily. as far as asset sales, let me just remind viewers again, asset sales work when there are asset buyers. caution here, nothing new that i saw out of today's call. >> do you feel any better about the board after some of the reforms they've made? >> absolutely. that's not necessarily because mcclendon all of a sudden got the gospel. that's simply because carl icahn got involved and you know, as opposed to having a long, prolonged hostile situation with ca, the board had to make changes. is it the worst board in the country or in the world now? no. it's not the worst board now because they've made the changes. but they weren't made because mcclendon all of a sudden
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decided, hey, we've got religion here. >> oh, no absolutely not. thanks, gary. >> you got it. >> meantime refined gasoline futures jumping in the aftermath of that fire at california's third largest processing facility. our sharon epperson has the latest. future still up? >> even though the fire is out, traders are now trying to assess the aftermath of the fire and how long it could take to repair the distillation unit. as a result we're looking at gasoline futures that are rising here up over 1%. 207ing $297 a gallon. but it's the california spot market that's really on a tear. where prices are up over 30%. about a 10% jump from yesterday's session there in that stock market. and that's where prices continue to climb and where we're really going to see the impacts here. this refinery accounted for about 15% of the gasoline that california residents use. so it's going to have a significant impact on that statewide average which is already above the national average at $386 a gallon.
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we always know that california gas is the among the most expensive in the nation. this is one of the few states where prices are higher than a year ago. so talking to traders on the floor they say not just in california but elsewhere around the country have already paid the lowest price we're going to pay this year for gasoline. prices only going to go up from here. >> interesting. that's an important point to remember. let's get to rick santelli in chicago with a look at subprime auto loans with a very special, special guest. rick? >> yes. don't show our special guest yet he's that special. real quickly last spot i did on the santelli exchange i was talking about how lowering rates, managing rates, pegging rates really doesn't have the desired consequence. you know we all talk about the successful in not very good terms. who are low rates helping? those very people, people who need it just consider this. we're talking about subprime in autos if you don't have a very high credit score you're going to be paying between 10% 12% and 20% to get these loans.
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gee, ben bernanke is certainly helping main street. all right my special guest phil, phil on the floor, la low. lebeau. nobody knows more about cars than our phil lebeau. what do you think about the subprime mortgages. let's show the chart, the chart please we see that used cars, subprime loans are at '08 levels. new cars the lower line at '09 levels. >> percentage of loans being written. here's the piece of data that is new. coming out today we checked with experian. the amount of repossessions, the rate of repossessions, that's down. the overall rate of subprime loans in the portfolio for the automakers. that's down year over year. the charge offs down year over year. so everybody talks about we can't be writing these subprime loans the automakers are getting into trouble. that's ridiculous. it's no different now than it was, lower than it was a year ago and you're getting back to '08 levels but that doesn't cause the problems of '08.
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the subprime auto market had nothing to do with the problems of '08. >> that's why we love lebeau? doesn't he sound passionate when he's here on the floor? subprime was basically a housing issue. >> actually. >> just the word subprime does present an issue where i want to put my little bird in the coal mine of the auto industry. i'm here to say after everything we've been through we'd be foolish not to pay attention to that chart. >> but i don't think that there's a canary singing in the coal mine just yet. here's why. i was at an audi dealership in the san francisco area and talking with the dealer there. i said what are you noticing in terms of the luxury market writing loans for somebody who has a 620 credit score, has no business buying a $60,000 luxury automobile. is that happening as much as it did back in '07 and '08? he said no. i checked with a few other luxury dealers. they said the same thing. >> so doesn't get a cadillac? >> i'm not going to talk about what he's driving. but here's the point. subprime for somebody who is
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buying a $16,000 car is far different than subprime back in '07 and '08 when you and i would see people driving down the street who had no business driving a bmw 5 series but they were written into that loan. >> that's why we have you phil you give us objectivity, because even moody's last week in a letter about the industry mentioned that the standards for lending in autos was coming down. why do i dig on gm because they're government motors. now everything phil said is true. a little retrospective, ally financial replaced gmac. 74% owned by the government, lost $1.2 billion in the quarter. then in the second quarter i think they bought americredit renamed it gm financial. these guys are into selling loans phil because they have a history littered with it. >> absolutely. but i have to go back to the data overall. i can't comment specifically on
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the portfolio for ally. when you look at the industry, the repo rates are down, chargeoffs are down and overall the percentage of subprime loans written relative to the whole portfolio of auto loans written it hasn't changed. so while i understand the concern that can be there, what i'm telling you is, almost everybody in the industry will tell you, we are seeing normal, as normal as that can be rates when it comes to the subprime market. >> we're going to bring phil back every month and monitor this for you on main street be careful of the 12% rates. they catch up with you quick. >> thank you guys. you guys look great together. great still phil and rick. when we come back, apple looking to keep its reign at the top of the tech world but with amazon, google and samsung all on its heels how much longer can apple stay on the top? two top ranked analysts lay out their views.
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all right. coming up in just a bit on the halftime report we've solved the mystery of the market melt-up as stocks surge for no real reason. and we'll ask legendary analyst why he's soundings alarm on hp and dell. plus another attack on social media from one of the biggest names on the internet. tune in at the top of the hour. carl, we'll also have a high frequency trader fighting back
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against our panel. >> that's a good story, too. thanks so much, scott. now to tech titan apple. obviously nearing a new all-time high just yesterday said it will not include google's youtube in the next version of the software used in the iphone and the ipad. managing director senior tech analyst atafterries joins us to talk about not just the experience for the user, peter, but the overall relationship between apple and google. what does this mean? >> it's an escalation of the ecosystem wars. we think apple is going to do everything they can to rip every vestige of that relationship out from search to maps to youtube to anything they can. we see that relationship completely breaking down. >> we knew this was coming. maps was a really good signal not too long ago. they're obviously popular apps. how important is it that apple replicate the quality of those apps? and how likely is it they will? >> on the maps side we saw a really cool demo. on the youtube side, we'll
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continue to argue that there is big upgrades and updates coming to the apple tv service. continue to believe that they're formally going to launch a tv in the near term. and we think all of that is part and parcel of their video strategy. video we think is going to be a big ecosystem differentiator and promoting youtube, which is google, is really a key hole in their strategy. so they had to plug that hole. and taking google out of the equation is a key part of the strategy. >> right. so there's no real argument that says it's better for the two of them if they work together, right? i mean, this is a net positive for the stock? >> listen, if they continue to have youtube or the maps on, what they're effectively doing is putting revenue into google's pockets, allowing google to refunnel that money into motorola and the android system and hurt ipad and iphone sales. they had to do this. the war escalated and is taking on a new front now. >> meantime we got all the
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speculation about the iphone 5. is it going to be the biggest launch in history? do you buy the stock ahead of what we think will happen on september 12th? >> we absolutely think it will be the biggest launch in history. we think there's 170 million people globally smart phone users coming out of contract in q4. that's a built-in buying base. last time we had the iphone 4s launch we only had 70 million to 80 million people and we had a blowout quarter. double the number of people able to upgrade for free so they don't have to pay fees or anything. just pay your normal subsidized $199 or $299 price. >> want to bring in gene munster, manager director at piper jaffray. good to have you with us. >> thank you. >> chatting with peter about the youtube issue, about the iphone 5. going back to the last quarter the guidance obviously was a disappointment to some but the stocks stubbornly trying to find these new highs again. what's your general take as we go into september. >> general take is you got to own it. people are going to have to be long for iphone 5 and what's
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ultimately beyond iphone 5. the television and obviously the ipad. mini likely at the end of september. so there's a lot of macro concerns. that was my big surprise after last quarter. heard from investors worried about the broader macro. they're starting to get through that and look at the brighter skies in the december quarter. >> does the timing of the 5 launch mean is september the best case would it have mattered much if this came in october instead in terms of looking at impact on the quarter? >> it really doesn't matter. and the reality is this. if somebody owns an iphone they're going to buy another iphone. the survey work we've done is 94% as peter was talking about the ecosystem. i think that 94% rebuy rate of iphone users really sums up the fact that it doesn't matter if it's the end of september or october. there's going to be long lines for this product. and the street knows that. but i think that that can have a big impact on numbers, too, that aren't reflected in current street estimates. >> peter, is google in your universe? >> we don't formally cover
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google but one of my partners here does. >> i was going to ask you whether or not meaning the decision to buy one or the other, to what do degree do you choose apple over google or vice versa? >> apple is on our conviction buy list so we would argue that that's our absolutely top pick in tech right now. >> is google a distant second or close? >> i think google is in the mix. i think it's one of the better names certainly to own. but apple is our top pick. >> yeah. peter your thoughts on comparing them to their rivals and you know we keep watching the headlines coming out of this samsung trial. i guess just the question linkers whether anyone, samsung, google or others have the wherewithal to truly catch up to them, right, to truly rob them of their mojo? >> the challenge for everybody right now is how are they going to go around apple? how are they going to do something better? make the experience so much better that you have no choice. once you lock yourself into your ecosystem by putting your photos, music and tv shows into
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an ecosystem it's so tough to move. everyone knows that so the challenge is to find something really cool and unique. thus far they haven't gotten the secret sauce which makes the device so easy to use. they haven't gotten that right yet. >> gene i know you always cover amazon. we've been talking about the issue regarding gaming. make sense to you? >> no. i don't think there's a lot of things that amazon does that doesn't make sense, a lot of things they do that do not make sense to me i think one of them is gaming, i think another thing is the device. they should just forget the whole device thing and build great apps that go on android and ios. i love the story for what they're doing in e-commerce but they tend to get a.d.d. of tech companies. >> yeah. i was going to say the device seems like that should have sailed. we'll see if they make something of it. gene, peter, always good to see you guys. thanks for the insight. >> thank you. >> straight ahead we're going to visit one of americas hotbeds for anger against congress and hear from the voters about why
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they're unhappy. you want to save money on car insurance? no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance.
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our john harwood is visiting ohio's 16th house district where newly drawn battle lines have some congressional members and their constituents up in arms. john joins us this morning from parma heights, ohio. john, good morning. >> good morning, carl. you know, ohio is a battleground in this presidential race, both sides investing heavily here. rob portman, senator from ohio, could become mitt romney's running mate. but it's also ground zero for the battle for congress and you don't have to talk to many voters to hear what the polls are telling us, which is that they don't think congress is getting the job done. >> a lot of talk. and not a lot of action. >> what action would you like to see? >> jobs.
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better jobs. better pay. people not losing their houses. you know to see a family on the streets, they're going to a food bank to make -- it's just sad. >> now do you -- >> i work two jobs. >> always a good thing, you know, if they're there for only to back the people that have put you in there, and not to do what's best for the country overall. and unite us all then i think it is a very good thing to have new people on the scene. >> here's the problem. you can't have new people in this race, because redistricting has thrown two incumbents together in a single district. republican jim renaci, and the democrat are both trying to explain to voters that it's not their fault, it's the other party's fault. >> i think it can be very discouraging. all people are looking for is a shot, a fair chance, and frankly, that's the fight that i'm in on their behalf. and so while it's true, it's
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been a difficult environment and it's so hard for people to cut through and see who's actually doing what. >> they don't understand why we're not getting things accomplished. i have to remind them that we are passing things in the house. the senate's not taking up any of these bills. once they remember that, i go back to those government classes. they understand we have to change things down there. >> of course they're not getting government classes in the advertisement like this ad from a labor union ridding renacci for backing attacks he told me he doesn't support, republicans doing the same thing to betty sutton. the voters may not feel in a much better mood come november than right now. >> we'll talk a lot more about that in the coming weeks and months. john harwood in ohio. final thoughts, dow is up 85. .
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